What a week for learning in Washington D.C. This was the first year that academic superstars Lawrence Summers, Ben Bernanke, and Christine Romer have gotten together to offer their new lecture course on “The Economics of the Great Recession of 2009”.
I enrolled in the course, which was taught at the Brookings Institution and the Council on Foreign Relations, in order to understand how these eminent academics actually think about the great large challenges ahead. Of course, it was actually three different lectures, but together it really did add up to as good a class as you could get on this subject.. It was clearly intended not only to educate but also to demonstrate that there is an overall plan to the President’s economic plan.
In that, it was obviously aimed at the larger classroom called the United States.
And there was some pretty direct signaling to those overseas — not only to Chinese premier Wen Jiabao, who on Friday had described himself was “a little bit worried” about U.S. economic policy and the security of China’s investment in U.S. government securities, but also to all the other G-20 leaders who will be getting together to hash out global economic strategy in London on April 2.
All three professors are more than highly-qualified to each the course. If you check the syllabus, you will find that both Federal Reserve Chairman Bernanke (Princeton) and Council of Economics Chairman Romer (University of California) have devoted much of their academic careers to seeking to understand the Great Depression, which used to be a long time ago. Now it turns out that the Depression did not happen so long ago after all. It is probably useful that the major research interest of these two key decisionmakers happens to be the Depression. The academic work of National Economic Council head Summers (Harvard) includes studies of numerous financial crises. He also comes equipped with the first-hand experience of helping to battle the financial crises of the 1990s.
Where to start? Of course, by explaining how a garden variety recession had turned into the Great Recession. But that is not all that easy. “The fundamental causes,” said Professor Bernanke with some understatement, “remain in dispute.” And each of the professors came at it from somewhat different perspectives.
Professor Bernanke was pretty sure that the causes were “the global imbalances in trade and capital flows that began in the latter half of the 1990s” — “a chronic lack of savings” in the United States and an “extraordinary increase in savings” in “many emerging market nations.” Basically, he was saying, the United States had morphed into a sort of supergiant “emerging market” country – resembling the emerging market countries that could not handle “large inflows of savings from abroad” in the 1990s and fell into crisis.